Growth Guarantee Scheme Poses Unexpected Risk to SMEs

20th August 2026: The Growth Guarantee Scheme has received a major boost in 2026, with the Government announcing a £6.5 billion expansion designed to unlock more lending for smaller businesses over the next four years.

For SMEs looking to invest, expand or strengthen their financial position, the changes could provide welcome access to finance. The scheme is also becoming more flexible, with longer loan terms available and a higher turnover threshold bringing more businesses into scope.

However, there is one important point business owners should not overlook.

The Growth Guarantee Scheme may be backed by the Government, but the guarantee is designed to protect the lender, not the business taking out the finance.

This means anyone securing funding through the scheme may still be asked to sign a personal guarantee, potentially putting their own assets at risk if the business cannot repay its borrowing.

That distinction – understanding what the Government guarantee covers and what it doesn’t – is essential before signing anything.

What has changed with the Growth Guarantee Scheme in 2026?

In July 2026, the Government announced a significant expansion of the Growth Guarantee Scheme (GGS), which is administered by the British Business Bank.

The scheme has received a £6.5 billion uplift, intended to unlock further lending to smaller businesses over the next four years. Other changes announced include:

• Maximum loan terms increasing from six to 10 years for loans of up to £1.1 million, giving businesses taking on substantial borrowing greater flexibility over repayments
• The maximum annual turnover threshold for eligible businesses increasing from £45 million to £54 million
• An estimated 33,000 businesses expected to benefit from the additional £6.5 billion of market lending

These changes considerably broaden the potential reach of the scheme, allowing some borrowers to spread repayments over longer periods and giving more businesses access to funding. However, greater access to finance does not necessarily mean less personal risk for the directors taking it out.

How does the Growth Guarantee Scheme work?

The GGS is designed to encourage lenders to provide finance to UK businesses that may otherwise struggle to secure the funding they need.

Through the scheme, the Government provides participating lenders with a 70% guarantee against the outstanding balance of eligible facilities. That sounds reassuring, but there is an important distinction.

The 70% guarantee is provided to the lender. It does not mean that 70% of the borrowing is guaranteed on behalf of the business or its directors. The borrower remains responsible for repaying 100% of the outstanding facility.

This is where confusion can arise, particularly when a director is also asked to provide a personal guarantee.

A personal guarantee sits entirely outside the Government’s arrangement with the lender. It’s a separate agreement, requested by the lender, which gives them a direct route to recover money if the business can’t repay.

Does the Growth Guarantee Scheme require a personal guarantee?

A common question from business owners is: does the GGS require a personal guarantee?

The Government guarantee does not prevent participating lenders from requesting personal guarantees. Personal guarantees are permitted at the lender's discretion and, depending on the finance agreement and circumstances, a director may still be asked to personally guarantee the facility.

The Growth Guarantee Scheme personal guarantee risk

Signing a personal guarantee creates a direct link between business borrowing and personal finances.

If the business is unable to meet its repayments, the lender may be able to enforce the guarantee and pursue the individual who signed it for the amount covered. Depending on the terms of the agreement, this could put assets such as personal savings, investments and property at risk. It is therefore important to understand exactly what is being signed before accepting a GGS-backed facility.

Todd Davison, MD of Purbeck Insurance Services said: "We welcome this £6.5 billion boost to the Growth Guarantee Scheme which is proving a lifeline for many firms. Its predecessor - the Recovery Loan Scheme - supported £4bn of lending, but business owners should be under no illusion about who the government-backed guarantee protects – it's the lender not the business. This has come as a shock to a number of businesses we have supported.

"Business owners securing funding via the scheme will still, in most cases need to sign a personal guarantee for the full extent of the loan and they will be liable for that debt if they default on payments. It is only once the lender has exhausted all avenues including the personal guarantee, to get the debt repaid that the lender can claim on the government-backed guarantee.

"The additional finance pledged through the Growth Guarantee Scheme could not come at a more crucial time for SMEs but it remains vital that business owners fully understand the risks of signing a personal guarantee and take steps to mitigate those risks."

With the expansion of the scheme, more businesses are expected to access finance through GGS over the coming years, and directors could find themselves considering funding options that come with personal guarantee requirements.

What happens if a GGS loan with a personal guarantee defaults?

A personal guarantee attached to a GGS loan becomes particularly relevant if the business experiences financial difficulty.

If repayments are missed and the facility ultimately defaults, the lender will seek to recover what it is owed in accordance with the finance and security arrangements in place.

A director who has signed a personal guarantee could therefore face personal liability for the shortfall.

This is why personal guarantees attached to GGS lending deserve the same care as any other business finance commitment.

Before signing, it’s worth understanding:

• How much of the borrowing they are personally guaranteeing
• Whether their liability is capped
• What assets could potentially be at risk
• How long the guarantee remains in place
• What circumstances could lead to enforcement
• Whether protection is available to reduce their personal exposure

Seeking independent legal advice can also help ensure the agreement and its potential consequences are fully understood.

How Personal Guarantee Insurance can help

Where a personal guarantee is required, directors can consider ways to manage the associated risk.

Personal Guarantee Insurance (PGI) is specifically designed to provide financial protection if a personal guarantee is enforced.

At Purbeck, policies can cover up to 80% of the personal guarantee risk, subject to the policy terms, helping to reduce the potential impact on a director's personal finances. This is especially relevant to businesses accessing larger facilities or longer-term finance through the expanded GGS.

PGI provides a separate safety net for personal exposure, alongside – not instead of – the Government’s guarantee to the lender.

Purbeck policyholders also have access to the Business Support Service, which provides practical support when a business begins to experience financial difficulty. This can include introductions to specialists in areas such as business recovery, cash flow management, debt management and financial restructuring.

Getting that support early can make a real difference when dealing with lenders and trying to prevent financial pressure from escalating.

What could the next Budget mean for SMEs?

Attention will also turn to the Chancellor's first Budget and what it could mean for UK SMEs.

The expansion of the GGS has already demonstrated a focus on increasing access to finance for smaller businesses. The Budget could provide further indication of the Government's approach to SME growth, investment and business finance.

For business owners, any further measures to improve access to funding will be welcome. But whatever announcements follow, directors should continue to look beyond the availability of finance and consider the personal commitments attached to it.

Personal Guarantees and the Growth Guarantee Scheme in 2026

If you're considering finance through the GGS and have been asked to provide a personal guarantee, make sure you understand your exposure before signing.

Purbeck specialises in Personal Guarantee Insurance and can help directors put protection in place against the personal financial risks associated with business borrowing. Speak to our specialist team to find out how we can help.